What's an EPC and do I need one?

You will have come across Energy Performance Certificates (EPCs) - the colourful displays used to indicate the energy efficiency in a property. They rank it on a scale from ‘A’ (the most energy efficient) to ‘G’ (the least energy efficient). The rating attributed to a property is widely known as its ‘asset rating’ or ‘energy performance rating’.

EPCs are usually accompanied by a ‘Recommendation Report’, which sets out various works or improvements that could be made to the property to boost its asset rating. 

BUYING OR SELLING

On the sale or letting of a property, there is a duty on the seller to provide, free of charge, a copy of a valid EPC for the property to the buyer. This should be done at the earliest possible stage in the transaction, and there are requirements in the ‘EPC Regulations’ (formally titled the Energy Performance of Buildings (England and Wales) Regulations 2012) to include the energy performance rating of a property in advertisements for its sale or letting.

A valid EPC is one that has been commissioned no more than 10 years before the date it is provided to a buyer. The EPC will specify the date it was commissioned, so this is straightforward to calculate.  

If, when selling, your property has no valid EPC, you will need to commission a new one, to be undertaken by a specialist EPC assessor, as soon as possible. There are limited exemptions from this rule, but they rarely apply to typical pharmacy properties. If you have any queries about potential exemptions, we recommend speaking with your legal advisor.

LETTING AND MEES REGULATIONS

The rules are much the same when letting property as a landlord or being let property as a tenant. If you are missing a valid EPC, you can commission a new one, whether you are the owner or the occupier/tenant of the property. Although, if you are a tenant, check your lease as it may include restrictions on whether a tenant can commission an EPC themselves.

There is an extension of the ‘valid’ EPC rule that applies to letting property. The Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 (the “MEES Regulations”) prohibit private landlords from granting new tenancies on non-domestic properties which have ‘sub-standard’ energy performance ratings – this means a rating of ‘F’ or lower. 

Furthermore, from 1 April 2023, the MEES Regulations will prohibit the continuation of existing leases in most cases where the energy performance rating of the property is ‘F’ or lower, meaning many landlords having to consider whether improvements need to be made to their property’s energy performance rating by that date, to ensure that their existing leases can continue lawfully. 

Whether a landlord makes improvements is their choice. (It’s not a statutory obligation as such). So a landlord cannot automatically insist that a pharmacy tenant undertakes the improvement works for them, unless the lease specifically requires this.

It is also worth noting that there are ongoing consultations which propose increasing the minimum threshold to ‘B’ or ‘C’ by 2030.

ALTERING YOUR PROPERTY

The majority of alterations made to a property will not trigger the need to commission a new EPC, but some significant alterations will. If you undertake alterations that redesignate part of your property, for example by separating part of it to be used independently or, conversely, by converting previously independent areas into a single usable property, a new EPC may be required for each of the new independently usable areas. 

This will only be the case if your alterations also alter the heating, cooling, hot water or ventilation systems, but you should always take advice when undertaking alterations, to be sure.

If you are a tenant, it is possible that your lease may contain restrictions imposed by your landlord not to make alterations to the property that adversely affect its energy performance rating. 

If you do so, then you may be in breach of your lease and could be required to reverse your alterations or undertake further works to restore the energy performance rating. Again, we recommend seeking specialist advice.

This is a general overview and we recommend that independent legal advice is sought for your specific concerns.

Ben Butterworth is a solicitor and member of the pharmacy transactions team, Charles Russell Speechlys LLP 

ben.butterworth@crsblaw.com